Gale Force has reached a conditional agreement with its lender to write-down a portion of its secured loan and convert the balance of the loan into shares of the Corporation. The Corporation also announced that it signed a letter of intent to purchase a 50% working interest in an oil and gas property in Seminole County, Oklahoma. Finally, the Corporation announced that it is seeking to raise proceeds of approximately $850,000 in a private placement through the issuance of common shares. The results of these transactions -- if they are concluded -- will be to completely eliminate the Corporation's secured loan, improve the size and potential of the Corporation's oil and gas reserves and provide sufficient equity capital and operational cash flow to continue as a going concern.
Secured Loan Agreement
The Corporation has reached an agreement with the holder of its $2,030,000 secured loan, Primatlantis Capital L.P. (the "Lender") to write-down $1,430,000 of the loan and convert the remaining $600,000 into shares at a price of one-half cent ($0.005), which would result in the Lender being issued 120,000,000 shares in a shares for debt transaction (collectively, the "Conditional Agreement"). The Conditional Agreement is conditional upon the Corporation raising a minimum of $850,000 in equity in the private placement (described below) and meeting other operational conditions. In exchange for writing-down $1,430,000 of the loan, the Corporation would assign to the Lender the right to receive the first $1,430,000 million in net proceeds from a litigation brought by the Corporation. The shares for debt conversion is subject to the approval of the Corporation's shareholders and subject to the approval of the TSX Venture Exchange and other customary regulatory approvals.
Letter of Intent to Purchase the Seminole County Property
The Corporation today signed a letter of intent to purchase a 50% working interest in an oil & gas property with 13 existing wells in Seminole County, Oklahoma (the "Seminole County Property") for USD$270,000. The vendor of the Seminole County Property is at 'arm's-length' from the Corporation. The acquisition of the Seminole County Property is subject to due diligence and would entail a development program for the completion and activation each of the wells to bring them on production. The purchase of the Seminole County Property would be expected to close on or about the end of June, 2009.
The Corporation is seeking to obtain equity financing of approximately $850,000 in a private placement of common shares of the Corporation issued at a price of one-half cent ($0.005) per share (the "Common Shares"). By way of example, if $850,000 is invested in the private placement at these terms, 170,000,000 shares will be issued to new investors. The Common Shares issued would be subject to a four-month hold period. Insiders of the Corporation would potentially invest approximately 10% of the gross proceeds of the private placement. The proceeds of the financing would be used by the Corporation to finance exploration and development expenditures on its properties, for the purchase and development of the Seminole County Property (or other properties) and for general corporate purposes. The private placement is part and parcel with both the Conditional Agreement with the Lender and with the purchase of the Seminole County Property. The private placement is subject to TSX Venture Exchange and other customary regulatory approvals.
If the proposed shares for debt and the private placement transactions are concluded, the Corporation would be expected to issue approximately 320 million common shares. The Corporation would then implement a consolidation of its common shares on a 50:1 basis following then approval of the shareholders.
In any case, the proposed transactions -- if they are concluded -- would be highly dilutive to existing shareholders. In light of the Corporation's secured loan and current capital market conditions, the Corporation does not believe that any other deal is possible under the circumstances that would preserve as much (or any) value for the shareholders. Further details as to any potential transactions will be announced when available.
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